Group cries foul at not being allowed to testify

Today’s Senate hearing on tax-avoidance “scams” has sparked heated controversy among income-tax opponents, who have been excluded from testifying.

The Senate Finance Committee hearing, which begins at 10 a.m. Eastern, is intended to “educate taxpayers about tax fraud scams before the April 15 tax filing deadline,” according to the committee. Senators will also “explore ways to improve the federal government’s policing of Internet-based tax schemes, scams and cons.”

As part of that education and exploration, the committee will have on hand a poster-sized version of an ad run several times in USA Today by the We The People Foundation. The ad outlines various arguments made by activists who believe the Internal Revenue Code does not require most Americans to pay income taxes or to have the taxes withheld from their paychecks. And regardless of the tax code, the 16th Amendment was fraudulently ratified, they say, so Congress has no power to tax citizens’ incomes.

“There is strong evidence that the IRS is disobeying the laws and forcing citizens to pay taxes they are not, by law, required to pay.” said We The People Chairman Bob Schulz. “Both the IRS and Congress refuse to answer the questions and allegations raised by numerous tax researchers, based on credible evidence. We want the IRS to obey the tax laws. Researchers allege the IRS is operating the biggest hoax ever perpetrated on any people by any government.”

Explaining the background issues leading up to the hearing, which wasn’t formally announced until late last week, the committee states: “The Internet provides an ideal venue for con artists to promote schemes aimed at tax avoidance. Both tax practitioners and the Internal Revenue Service agree that Internet-based tax fraud scams are on a sharp increase. They believe hundreds of thousands of taxpayers are either participating in these schemes or are seriously considering participating in them by receiving literature and attending seminars.”

But what exactly constitutes a tax “scam”? That is a question Schulz wants answered. Schulz — whose request to be added to the committee’s witness list was denied — fears the committee will wrongly classify critics of the current tax system as scam artists.

The world of tax avoidance is populated by roughly two classes of people: those out to make a buck by knowingly selling misleading and even false tax information and those who genuinely seek intellectual debate on the meaning of the tax code and the validity of the 16th Amendment’s ratification. The latter group sincerely believes U.S. tax law does not require most Americans to pay income taxes and tries to make its research known to the general public. But should these people be labeled as promoters of “tax fraud scams,” which are the focus of today’s hearing?

According to the committee’s description of the hearing’s scope, “Common themes for these scams are trust arrangements to illegally shelter trust incomes from taxes and other means of hiding assets. More off-beat scams include quick minister licensing to illegally claim tax benefits, as well as individuals establishing their own countries to seek to shelter assets and income.”

Committee spokeswoman Jill Gerber acknowledged the difference between the groups and said the distinction would “probably” be brought up in the hearing by one of the witnesses. But whether tax-avoidance groups are populated by scam artists or well-intentioned, intellectually honest folks grappling with the law, the result is the same, insists Gerber: People are not paying taxes they are legally required to pay. That often leads to huge financial penalties and ultimately lands tax avoiders in jail. For that reason, she said, the committee has denied We The People the opportunity to testify in person at the hearing.

“We don’t feel the need to provide a forum to a group that advocates breaking the law,” said Gerber, who noted the tax-attorney-staffed committee reviewed WTP’s material. Staff concluded the information was incorrect and determined the group is promoting “illegal efforts to avoid paying taxes.”

Income-tax opponents, including Schulz and his organization, do have the opportunity, however, to submit written statements to the committee, which will consider including the statements into the hearing record. Gerber clarified that such statements are not guaranteed inclusion into the record, since the committee does not believe it must necessarily give voice to “illegal” arguments.

Gerber also noted that WTP’s ad is not the focus of the hearing, but is merely being used to illustrate the arguments made by income-tax opponents and the venues used to promote them. The ad clearly spells out the arguments in one page, making it an ideal prop for the hearing.

Scheduled to testify at the hearing is Aaron Bazar, fomer seller of tax scams for the Institute for Global Prosperity who now operates a website alerting taxpayers to the scam he helped run. Other witnesses include two tax attorneys, two financial planners who keep abreast of tax scams, IRS Commissioner Charles Rossotti and two government bureaucrats.

Schulz takes exception to being lumped in with tax cheats and objects to his exclusion from the hearing’s witness list.

“It is incongruous that the Senate would hold a hearing featuring our full-page ads and not invite us to testify,” he said. “They apparently have a message that they want to convey, which is [opposite] to our message. They apparently want to divert attention away from our questions of whether the IRS is collecting taxes without constitutional or statutory authority by trying to portray those who raise such questions as scammers.”

“We don’t tell anybody not to file or not to withhold taxes. We are just educating the public on the facts as we see them,” Schulz told the Glens Falls Post Star. “We’re trying to develop a critical mass of people demanding answers.”

He may have succeeded. Traditionally known as “tax protesters,” although today preferring the name “tax-honesty movement,” income-tax opponents are adding to their number every day and have now gained the attention of Congress. Though their legal arguments fail in court, they are drawing considerable attention to the income-tax system as a whole. Rossotti acknowledges the efforts of “tax protesters,” but suggests a failed attempt to prove income taxes are illegal could be replaced by a broader movement to change the current system.

“There are a lot of questions that people can raise about how the tax system in this country is structured, how the tax code is structured, but that’s why we have a democracy,” Rossotti is quoted by CBS News. “We have a Congress and everybody has the right to go talk to their congressman or senator about what they like and don’t like about the tax code.”

Calling leaders of the tax-revolt movement “foolish heroes,” tax analyst Roger Pilon of the Cato Institute said the government will ultimately win this battle. Income-tax opponents like We The People are “reading the tax law in so strained a way, and they will in time pay the price for it,” he told CBS. “But they’re heroes in the sense that they are bringing public attention to an issue that needs public attention.”